"either an idiot... or possessed of a dangerous agenda and very cunning"

Sunday, 9 December 2007

Fidelity replies...

I received the reply below from Fidelity yesterday. Just to recap in my letter I asked them three questions -

• What is the rationale for making donations to the Conservative Party?• Does Fidelity intend to make similar party political donations in future?• Does Fidelity disclose these donations when this is a potential conflict of interest (ie when presenting to Conservative-controlled local authority pension funds)?

I've read through the reply they have sent several times and my view is that they have answered the first question, but in a rather disingenuous way. They say the donations are part of their efforts to ensure "that the political and regulatory climate in which we operate enable us to give our clients the products and services they need in the most effective way possible."

This suggests that they see making party political donations (as opposed to incurring expenditure through lobbying) as a way to influence "the political and regulatory climate" which is a bit of worry in itself. But secondly even if this were true surely it would make more sense to make donations to all the major parties, particularly the one in government? Why would you not make donations to the party in power which is actually in a position to significantly shape the regulatory environment? It doesn't make much sense.

The second question I asked is clearly the most important since I have told Fidelity that we are thinking of moving our savings if future donations to the Conservatives are going to be made. From my reading of this letter they haven't answered this question at all. So I am left in the same position I was in before - not knowing if this is an ongoing situation that requires me to take action.

On the third question they state that they don't believe that there is a conflict of interest. So presumably this is why they don't answer my specific question about whether such donations are disclosed when they are pitching to certain potential clients. In fact the more I think about this the more I think they should disclose their donations to ALL clients (and potential clients). I had no idea that Fidelity was a Conservative Party donor when I set up the ISA. There is no way I would have set it up if I had known. A listed company would have to put such donation to a shareholder vote. So I think it is fair to ask that they disclose party political donations clearly somewhere in their marketing materials to give people the same choice.

So I am going to write again seeking some further information before I decide what to do. The bottom line is that I want to know if these donations are going to cease as this affects whether I want to remain a customer or not.

Separately there is the question of institutional clients - primarily pension funds. I am not at all convinced that there is no conflict of interest when they are pitching for business to politically-controlled pension funds. I know from having trawled council minutes in the past that councillors have to disclose potential conflicts and will even absent themselves from panel discussions in some cases. How can there NOT be a conflict of interest when Fidelity is pitching for business to a pension fund that is controlled by a political party to which they have given £415,000?

Finally it's worth mentioning that what has started off as a personal irritation (we would rather not have to move our savings simply because it's a hassle and we still think Fidelity are a decent outfit) is taking on a bit of life of its own. Obviously my wife and I have been talking to friends and colleagues about this and to date not a single person has come back with a "yeah, but". Everyone we have been speaking to about it has shared our disbelief that a company you go to for financial services products adopts a partisan political stance. The word that has come up most often when we have told people the story is "arrogant", which I assume is not something a company particularly wants to become known as. Their written reply, which comes across as cagey and dishonest, does little to dispel this impression.

I will post up our reply next week.

Dear Mr XXX

I write further to your letter which we received on 6 December 2007 with regards to Fidelity's donations to political parties.

I understand that you are concerned that a fund management company such as Fidelity should make donations to a political party. I can assure you that the donations were made from Fidelity's own resources and did not come from our clients' money.

Fidelity always acts in what it believes to be the best interests of its clients. In common with many companies, we have an active engagement programme with politicians and civil servants in the UK as well as with key European Union institutions. The principal aim of such activity is to ensure that the interests of our clients are fully represented to people and organisations that influence or determine policy in areas that affect financial services.

In doing so we seek to ensure that the political and regulatory climate in which we operate enables us to give our clients the products and services they need in the most effective way possible. The recent donations to the Conservative Party were an element of this much wider initiative.

The UK faces a significant problem in that people are not saving enough for their retirement. Our approach is to seek to encourage individuals to make better financial preparations for their retirement by encouraging appropriate incentives from government for people to save throughout their working lives. This would help to prevent future generations from subsisting on an inadequate income in retirement. Fidelity International has long pursued strategies that encourage long-term savings and we are supportive of any moves that would help close the retirement income gap.

Donations to political parties have to be disclosed by law and all our donations are appropriately disclosed on the website of the Electoral Commission. Its register of donations is freely accessible to all. There is no connection between such donations and any investment decisions made on behalf of our clients, so we do not believe there is any potential conflict of interest.

I hope I have provided you with an insight into this issue. I understand you are considering removing your holding with Fidelity over this issue, and I am most sorry to hear that. However, if you do wish to move your holdings elsewhere, we will make every effort to ensure the closure of your account is completed with a minimum of inconvenience to you.

If you are dissatisfied with my response you can refer your complaint to the Financial Ombudsman Service (FOS); howvere, if you choose to do this you must do so within six months. You can contact the FOS at the following address:

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About Me

I work at the International Transport Workers Federation on capital stewardship. I'm interested in developing a stronger voice for labour in the capital markets, responsible investment and corporate governance.
This blog represents my personal views only.